As a shareholder of Meta (Nasdaq: META), here’s my quick take on what I’m expecting out of Meta’s earnings today, and what I’m doing.

I expect Meta to have blowout earnings as two forces combine.

1. CEO Mark Zuckerberg’s relentless cost cutting and his Year of Efficiency
2. The value of AI beginning to work its way into their ad business on multiple levels.

What I’m less sure about is whether those forces will yield the results I expect in this specific quarter or next, but I’m betting they’re both coming.

Facebook’s Year of Efficiency 

You can argue whether Meta needed to cut costs, or if Mark Zuckerberg was simply not wasting the crisis to shut down unpromising projects with less internal blowback, but the end result is the same. 

Zuckerberg has spent 2023 closing down projects, laying off employees who no longer fit with his vision and stopping future hires for similar reasons. The net result of this is 15,000 fewer employees against a roughly 70,000 employee base. This removes not just their salaries from the expense line, but benefits, stock grants, office space and other related expenses.

Fewer employees also means fewer managers and layers within the company, another of Zuckerberg’s stated goals, taking the company a few steps back to its fast-moving startup roots.

The end result after severance is fully paid out is a leaner company, more focused on the core business with a greater amount of cash flow going to the bottom line.

AI’s Ramping Impact on Facebook Advertising

You’re probably sick of reading about artificial intelligence (AI) on the internet, but if you are or plan to become a Meta shareholder, you need to be aware there is likely no company better positioned to use AI to generate outperformance in their business and stock. 

Here are a few of several ways I see Meta using AI, at increasing rates each quarter:

1. Better preference matching with fewer privacy concerns: Have you read or interacted with three things on Facebook or Instagram? Then Meta is uniquely positioned to suggest advertising that is more appealing to you.
2. Easier to create high-performance ads: Since Meta knows what ads work based on two decades of data, they can effectively “fill in the gap” when an advertiser is creating ad creatives or campaigns on their platform, and suggest things that will more greatly appeal to consumers. If you’re an ad buyer, and your ad is outperforming, then you spend more and more with Meta. It’s that simple.
3. Custom advertising, unique to the individual: I believe this opportunity is underdiscussed, but equally important. It seems likely to me that as a user does engage with ads, Facebook begins to learn what appeals to them specifically. This goes meaningfully beyond the now “old hat” phenomenon of buying something online, and then being targeted by ads to buy that same thing again. Rather, my prediction is Meta will learn which type of consumer you are, and what kind of advertising you respond to, and then flow that information back to all its advertisers, in an anonymized, privacy centric way. The end result, again, will be more clicks, more sales, more ad spending. 

So, What Am I Doing Before Meta’s Earnings Today?

As I said, I have been a Meta shareholder and I will continue to be one, regardless of what happens after the bell today. I don’t know exactly when these forces will reach their maximal value to shareholders, but I plan to be along for the ride when they do.

If you do plan to buy Meta before earnings today, I suggest you do it with the mindset of holding the stock for 3-5 years, because frankly, I think they’re still just getting started.

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